Fremont General and New Century are Toast, LEND is next
Fremont (FMT) To Sell Subprime residential business
Last Update: 6:45 PM ET Mar 2, 2007
New Century says it faces criminal probe
Subprime-mortgage lender warns it will likely breach lending covenant
Last Update: 6:45 PM ET Mar 2, 2007
SAN FRANCISCO (MarketWatch) -- Fremont General Corp. announced Friday that it intends to sell its subprime residential real-estate lending business.
In a statement late Friday, Fremont General said that the decision was "prompted by the company's receipt on Feb. 27 of a proposed cease and desist order ... from the Federal Deposit Insurance Corporation."
The company added that the FDIC order contained requests for changes that would restrict Fremont General's level of subprime residential-mortgage lending, but offered no further details.
Subprime mortgages are offered to buyers who fail to meet the strictest lending standards. Firms like Fremont General that specialize in these loans have suffered as housing prices stopped rising, and interest rates climbed from record lows. Roughly half of Fremont General's business has been subprime loans.
News of Fremont General's exit from the subprime residential market comes after the company announced Tuesday a delay in the filing of its fourth quarter and annual financial results. That sparked speculation that the subprime business was causing problems for Fremont General, and its shares fell 24% on Wednesday.
The FDIC order "does not seek any changes in the company's retail deposit-gathering business," according to Fremont General. It also will continue its commercial real-estate loan business, which the lender said "continues to perform well and remains profitable."
Fremont General also announced Friday that it intends to file the annual report by March 16.
New Century says it faces criminal probe
Subprime-mortgage lender warns it will likely breach lending covenant
SAN FRANCISCO (MarketWatch) -- New Century Financial Corp. said late Friday that it's facing a federal criminal probe and will likely breach a major lending covenant with its financial backers, bringing into question the survival of the second-largest U.S. subprime-mortgage lender.
The U.S. Attorney's Office for the Central District of California is conducting a federal criminal inquiry into trading in New Century securities as well as accounting errors, the company wrote in a regulatory filing late Friday.
The Securities and Exchange Commission also is looking into the company, as is the regulatory arm of the New York Stock Exchange, New Century disclosed. The company added that it is complying with all three inquiries.
Shares of New Century (NEW) were down almost 25% in after-hours trading Friday at about $11, after falling more than 7% in the regular session to $14.65.